U.S. President Joe Biden signed an executive order on Thursday that fortifies a regulatory committee’s powers to screen foreign investments in the U.S., many of which included Chinese shares in tech in recent years.
The Committee on Foreign Investment in the United States (CFIUS), which was established in 1975 under the Ford administration, is now tasked with expanding its areas of review, as well as regularly evaluating its processes, practices and regulations to ensure that they “remain responsive to evolving national security threats.” While the order does not explicitly mention China, it names sectors that are fundamental to both U.S. technological leadership and national security, including “microelectronics, artificial intelligence, biotechnology and biomanufacturing, quantum computing, advanced clean energy and climate adaptation technologies.” These happen to be areas of focus in Chinese President Xi Jinping’s “Made in China 2025” plan, according to The New York Times.
The order also cites cybersecurity as a standalone focus. It instructs the committee to consider whether a foreign investment may facilitate “cyber intrusions or other malicious cyber-enabled activity” that could pose a risk to national security.
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Treasury Secretary Janet Yellen, who chairs CFIUS, welcomed the new executive order in a statement.
“President Biden’s Executive Order highlights CFIUS’s increasing attention to national security risks in several key areas and sharpens the Committee’s focus on protecting America’s national security while maintaining the U.S. open investment policy,” Yellen said.
“Strengthening our supply chains and protecting against foreign threats enhances our national security, and this Executive Order highlights CFIUS’s important role in that work,” Yellen continued. “It also reaffirms CFIUS’s mission to protect America’s technological leadership and the security of our citizens’ sensitive data from emerging threats.”
The executive order marks the first time since the establishment of CFIUS that a president has laid out risks that the committee must consider across transactions. Former Treasury official J. Philip Ludvigson, who also worked with CFIUS, suggested that business should be ready.
“Businesses should not be surprised if Treasury comes knocking to learn more about investments that may pose a risk to the country,” Ludvigson, who is now a partner with King & Spalding LLP, told The Hill. “For the first time since CFIUS was established nearly five decades ago, this order directs the committee to consider certain national security factors.” Ahead of the order’s announcement, several sources also told Reuters about the Commerce Department’s plan to enforce new regulations on semiconductor exports based on restrictions previously communicated to three U.S. companies. These restrictions reportedly prevented them from exporting chipmaking equipment to Chinese factories that make advanced semiconductors without a license.